Get Ready for the Tax Cuts and Jobs Act New Due Diligence Requirements

After this seminar you will be able to:

• Understand the effects of the Tax Cuts and Jobs Act (TCJA) on clients’ refundable credits

• Determine your clients’ eligibility for Child Tax Credit (CTC)/Additional Child Tax Credit (ACTC) or the new Credit for Other Dependents, known as ODC

• Understand due diligence requirements related to CTC/ACTC/ODC and Head of Household filing status

Cont.

After this seminar you will be able to:

• Avoid common errors in complying with due diligence requirements

• Understand penalties for not meeting due diligence requirements

• Understand plans to change Form 8867 for TY 2018

TCJA Important Changes

• Zero amount for personal and dependent exemptions

• New requirement (Social Security number) for CTC/ACTC qualifying children

• Increased phase-out limits for CTC/ACTC

Cont.

TCJA Important Changes

• The addition of Credit for Other Dependents (ODC)

• Establishment of due diligence requirements and penalties for claiming the Head of Household filing status for Tax Year 2018 and beyond

EITC and AOTC – TCJA changes

Earned Income Tax Credit (EITC)

• No change

American Opportunity Tax

Credit (AOTC)

• No change

Child Tax Credit/Additional Child Tax Credit –TCJA Changes

The child must have a valid SSN to qualify for

BOTH the nonrefundable and refundable credit

portions

Increase in credit and refundable portion

Other credit restrictions

Increases to income phase-out amounts

New CTC/ACTC Income Phase-Outs *Full Credit Partial Credit Phased Out –

No CreditSingle 0 - $200,000 $201,000 - $239,000 $239,001+

Married Filing Jointly 0 - $400,000 $400,001 - $439,000 $439, 001+

Head of Household 0 - $200,000 $200,001 - $239,000 $239,001+

Married Filing Separately 0 - $200,000 $200,001 - $239,000 $239,001+

* This chart is an example of phase-out amounts for taxpayers claiming CTC/ACTC for one qualifying child. The phase-outs are greater for multiple children or if ODC is claimed.

Video 1 Placeholder

Video 1 Recap and Discussion

The preparer must consider qualifications for:

CTC/ACTCCredit for

Other Dependents

Possible Filing Status

For CTC/ACTC the tax preparer must consider:

• Relationships• Child’s age• Support• Residency• Tax identification

numbers

CTC/ACTC SSN Valid for Employment versus ITIN

Taxpayer may have a social security number or an ITIN

Child must have a social security number valid for employment

Test Your CTC/ACTC Knowledge

Taxpayer has SSN and the Child has SSN…

Will the taxpayer possibly qualify for CTC/ACTC?

Test Your CTC/ACTC Knowledge

Taxpayer has ITIN and the Child has SSN…

Will the taxpayer possibly qualify for CTC/ACTC?

Test Your CTC/ACTC Knowledge

Taxpayer has SSN and the Child has ITIN…

Will the taxpayer possibly qualify for CTC/ACTC?

Credit for Other Dependents (ODC)

• Examples of Other Dependents…– Qualifying relative 17 years

and older – Qualifying children with

ITIN or ATIN– Qualifying relatives

including client’s agingparent

Test Your ODC Knowledge

Taxpayer has SSN and other dependent has SSN…

Will the taxpayer possibly qualify for ODC?

Test Your ODC Knowledge

Taxpayer has ITIN and other dependent has SSN…

Will the taxpayer possibly qualify for ODC?

Test Your ODC Knowledge

Taxpayer has ITIN and other dependent has ITIN…

Will the taxpayer possibly qualify for ODC?

Video 2 Place Holder

Video 2 Recap and Discussion

Child Tax Credit eligibility

Head of Household filing status

Head of Household (HoH) Qualifications Your client must pass the following three tests:

Marital status Qualifying person

Cost of keeping up a home

Due Diligence Requirements

Apply the knowledge requirementCompute the creditsKeep all required recordsComplete and submit Form 8867

Due Diligence Most Common ErrorsFailing to meet the knowledge

requirement

Failing to keep records and

documentation

Due Diligence Preparer Penalties

• $520 X 20 for EITC • $520 X 20 for CTC/ACTC/ODC • $520 X 20 for AOTC • $520 X 20 for HoH = $41,600 penalty

• Paid preparers• Employers of paid preparers

Computation Example:

Upcoming Form 8867 Revisions

4 Takeaway’s you need to remember

Income phase-out for Child

Tax Credit (CTC) have

significantly increased

Eligible child for the CTC must have a

social security number valid

for employment.

Remember to consider the

new Credit for Other

Dependents (ODC)

Due diligence now applies to

Head of Household

returns

Resources on EITC Central at eitc.irs.gov -Tax Preparer Toolkit• Hot Topics • Due diligence training module for continuing

education credit• Frequently asked questions by preparers• Due diligence training video and more tools

Contact us at EITC.program@irs.gov

Thanks for attending!

Get Ready for the Tax Cuts and Jobs Act New Due Diligence Requirements